We may be stuck in an economic crisis, but we're long past the point of being interested in what economists have to say about ending it. Last weekend, Republicans succeeded in forcing Nobel-prize winning economist Peter Diamond to withdraw his nomination to serve on the Federal Reserve's Board of Governors. Their reasoning? He was unqualified. For two years now, economists on both sides of the political aisle have been begging Congress to cut the obvious deal: significant short-term stimulus paired with two or three or four times as much long-term deficit reduction. We're nowhere near cutting that deal. About half of official Washington is now pretending that tax cuts have nothing to do with deficits and tax increases have no place in closing deficits, a position even conservative economists consider extreme.
Is that why Austan Goolsbee is leaving? Perhaps not. The Chicago economist has been with Obama since the campaign (and in fact worked on his initial Senate campaign). That's a long time to be in the political pressure cooker. It's a long time to be away from your university, and to ask your family to accomodate a new city and new hours and new responsibility and new notoriety. But it can't have helped. If Goolsbee was spending his days crafting major economic policy to help the country dig out of this hole rather than trying to wanly explain that a slow recovery is nevertheless a recovery, the job would've been rather harder to vacate.
Which suggests that the real question isn't who his replacement will be, but whether he or she will matter. The job of the CEA chair is to give the president good economic advice. That's a very important job if the president can take your advice. It's a very dispiriting job if he can't.
Five in the morning
1) Obama gets very low marks on the economy in the latest Washington Post/ABC News poll, report Dan Balz and Jon Cohen: "By 2 to 1, Americans say the country is pretty seriously on the wrong track, and nine in 10 continue to rate the economy in negative terms. Nearly six in 10 say the economy has not started to recover, regardless of what official statistics may say, and most of those who say it has improved rate the recovery as weak...Overall, about six in 10 of those surveyed give Obama negative marks on the economy and the deficit. Significantly, nearly half strongly disapprove of his performance in these two crucial areas. Nearly two-thirds of political independents disapprove of the president’s handling of the economy, including — for the first time — a slim majority who do so strongly."
2) Austan Goolsbee's out, reports Zachary Goldfarb: "Austan Goolsbee, one of President Obama’s most trusted economic advisers, said Monday night that he would resign, marking the latest departure from the president’s economic team at a time when the nation’s jobs recovery is slowing. Goolsbee, chairman of the Council of Economic Advisers since September, is leaving to preserve his tenured professorship at the University of Chicago...His departure comes as Obama confronts an increasingly tepid economic recovery. Goolsbee, who is regarded as one of the administration’s most effective speakers on economic policy given his background as a star lecturer, spent Friday answering questions about the unexpected news that the economy added only 54,000 jobs in May as the unemployment rate inched back up to 9.1 percent."
3) Financial reform is behind schedule, reports Louise Story: "Nearly one year after Congress passed financial changes to rein in the banking sector, more than two dozen of the legislation’s rules are behind schedule, and no end to the wrangling over details is in sight. The delays come as regulators extend public comment periods on the rules, and as some on Wall Street and in Congress resist the changes. One result may be that many new safeguards do not take hold in earnest before the next election, an outcome that could open the door for newly elected officials to back away from the overhaul. The rules are mandated by the Dodd-Frank financial regulatory law and range from curbs on executive compensation to consumer banking protection provisions to more transparency in the trading of derivatives, those complex financial instruments that contributed to the 2008 financial crisis."
4) The federal personnel gap is growing, report Zachary Goldfarb and Neil Irwin: "The federal government faces huge gaps of leadership in economic and financial policymaking, with about a dozen senior positions vacant or staffed by temporary caretakers, at a time of economic duress and efforts to write hundreds of new financial regulations...Treasury Secretary Timothy F. Geithner warned Monday that a failure by the Senate to confirm nominees to run federal regulators would be especially harmful because the agencies are trying to write hundreds of new financial rules...Key housing positions are vacant. Earlier this year Republicans blocked Obama’s nominee to head the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac. The Federal Housing Administration, which oversees loans to first-time home buyers, needs a new commissioner."
5) Republicans have found a way around the earmark ban, reports Adam Weinstein: "Rep. Buck McKeon (R-Calif.), the chairman of the House Armed Services committee, talks a tough line on the defense budget. Members of his committee, as well as 'the broader Congress--and the nation--must make tough choices in order to provide for America's common defense,' he said when unveiling the panel's budget plan...However, as it stripped money from the proposed budget, McKeon's committee quietly set aside $1 billion in a newly created fund, buried within section 1433 of its 920-page bill under the heading 'Other Matters.' Called the Mission Force Enhancement Transfer Fund, the money is ostensibly held in reserve so that the DOD can fund necessary projects at its discretion. In fact, the House budget would funnel more than $650 million from the MFET back to representatives' pet projects."
'90s nostalgia interlude: Nirvana plays "Where Did You Sleep Last Night?" on MTV Unplugged.
Got tips, additions, or comments? E-mail me.
Still to come: Democrats are frustrated by the handling of Peter Diamond's Fed nomination; Alabama is charting a surprisingly liberal course on health care; three liberal states are rejecting the administration's immigration enforcement program; OPEC's meeting this week isn't expected to change oil prices; and twin babies sneeze in unison.
Democrats are frustrated by the administration's lack of action on Peter Diamond, reports Binyamin Appelbaum: "The decision by a noted economist Monday to end a 14-month wait for a seat on the Federal Reserve Board of Governors is renewing concerns among some Democrats about the fighting spirit of the Obama administration...Congressional aides said that the White House invested relatively little energy in fighting for Mr. Diamond. Moreover, they said that the administration had not submitted nominations for vacancies atop several of the federal agencies charged with overhauling and improving financial regulation in the wake of the 2008 crisis. 'There’s a deep feeling of frustration,' said one Democratic aide, who spoke on the condition of anonymity because of the sensitivity of the subject. 'No one wants to insult the administration or put them in a position that’s uncomfortable for them or worse for them. So you’re just sitting around waiting for them to take the lead.'"
Dick Durbin wants to let states impose Internet sales taxes, reports Michelle Quinn: "Sen. Dick Durbin (D-Ill.) is expected to step into the escalating Internet sales tax battle as soon as this week with a bill that would allow the 44 states -- plus Washington, D.C. -- that collect sales taxes to require out-of-state online retailers to pay up. Durbin’s Main Street Fairness Act is similar to some previous congressional efforts to weigh in on whether states can force online businesses to collect sales taxes on items sold to state residents. But while those efforts failed, this year may be different. Faced with state budget shortfalls, some large states like Texas, California and Illinois are looking to online retailers for additional tax revenues. As a result, large e-tailers -- such as Amazon.com -- have threatened to cut off affiliates who sell in those states rather than start collecting taxes."
People with second mortgages are suffering hardest, reports Robbie Whelan: "Almost 40% of homeowners who took out second mortgages--extracting cash from their residences to cover everything from vacations to medical bills--are underwater on their loans, more than twice the rate of owners who didn't take out such loans. The finding, in a report to be released Tuesday by real-estate data firm CoreLogic Inc., illustrates the consequences of easy borrowing amid the housing boom's inflated prices. The report says 38% of borrowers who took cash out of their residences using home-equity loans are underwater, or owe more than their home is worth. By contrast, 18% of borrowers who don't have these loans were underwater. It's not clear how much cash withdrawn from homes during the boom was used to acquire luxuries such as expensive automobiles, and how much went to basic necessities."
There's a good case for an 100 percent estate tax, writes Megan McArdle: "Inheritance not only hands people valuable income in return for something we don't really want to further reward--being born lucky--but also, in doing so, it entrenches the least attractive feature of our economy: the fact that people who are born to affluent parents are much more likely to themselves be affluent than children born to the less well-heeled. Lack of economic mobility is generally regarded as a bad thing that we should combat. Yet so many of our institutions, from the geographic organization of our schools, to the financial distribution of our inheritances, reinforce it. Some of those things are not going away...But what are the social benefits that inheritance conveys to offset its drawbacks? "
Republican tax cut proposals don't do enough for the middle-class, writes Ramesh Ponnuru: "A related defect of these plans is political: They provide no direct benefit for middle-class voters. Yet the supply-side revolution was politically successful in the first place because it offered these voters the chance to keep money in their pockets...In recent years, though, Republicans have tried to cut taxes for corporations and high earners without doing anything for the middle class. (Anything direct, that is: The middle class was told it would benefit from higher growth.) It’s not surprising, then, that the Republican advantage on taxes has declined -- or that in recent elections, most voters haven’t told pollsters that Republicans are 'in touch' with people like them."
Adorable children being adorable together interlude: Twin babies sneeze in unison.
Alabama is carving out a liberal course on health care, reports Sarah Kliff: "Alabama is a deep red, Deep South state with a health policy that is taking on a decidedly blue tinge these days. Last week alone, Republican Gov. Robert Bentley issued an executive order to move forward on an Alabama health insurance exchange and lashed out at the state’s Republican-controlled Legislature for attempting to scale back his proposed $247 million increase in Medicaid funding by a mere $7 million. He sent the budget back with an executive amendment restoring half of the cut, and in a closed-door meeting with state Republicans, Bentley let his feelings be known...[Alabama] has a governor gunning to set up a health exchange, a Medicaid director skeptical of block grants and a rapidly expanding Children’s Health Insurance Program."
The Supreme ruled for pharma and against universities in a patent case, reports Robert Barnes: What was true in 1790, the Supreme Court ruled Monday, is true still: An inventor owns his invention. Chief Justice John G. Roberts Jr. said that a 1980 federal statute allocating patent rights involving federally funded research did not change that basic tenet. And so Stanford University does not fully own patents that led to the development of a widely used human immunodeficiency virus (HIV) test, the court ruled in a 7 to 2 decision. Stanford researchers had worked with a private company on a technique to measure the amount of HIV in a person’s blood, which led to a test kit marketed by Roche Molecular Systems. The case was closely watched by universities, private research and development companies and the federal government, which often jointly conduct research."
Ryancare doesn't account for regional differences, write Shannon Brownlee and Eric Schultz: "In Minneapolis, Medicare spent on average about $7,000 per beneficiary in 2007, the most recent Dartmouth Atlas figure available. That's on the low end...At the high end, Medicare paid out nearly $16,000 per beneficiary in McAllen, Texas...Under the Ryan plan, those regional differences might come into focus when seniors are forced to buy their insurance on the private market. There's no guarantee that private insurers would base their prices on local spending, but if they did, $8,000 a year would buy patients in Minneapolis a gold-plated health plan, with all sorts of fringe benefits -- maybe a new pair of glasses every year, or memberships in health clubs. In Miami and McAllen, $8,000 would hardly be enough for a high-deductible plan."
Democrats have a philosophical commitment to top-down programs, writes David Brooks: "The fact is, there is no dispositive empirical proof about which method is best -- the centralized technocratic one or the decentralized market-based one. Politicians wave studies, but they’re really just reflecting their overall worldviews. Democrats have much greater faith in centralized expertise. Republicans (at least the most honest among them) believe that the world is too complicated, knowledge is too imperfect...In the age of the Internet and open-source technology, the Democrats are mad to define themselves as the party of top-down centralized planning. Moreover, if 15 Washington-based experts really can save a system as vast as Medicare through a process of top-down control, then this will be the only realm of human endeavor where that sort of engineering actually works."
My column: Centralized systems have soundly bested America's health-care experiment: "Our government spends more on health care than the governments of Japan, Australia, Norway, the United Kingdom, Spain, Italy, Canada or Switzerland. Think about that for a minute. Canada has a single-payer health-care system. The government is the only insurer of any note. The United Kingdom has a socialized system, in which the government is not only the sole insurer of note but also employs most of the doctors and nurses and runs most of the hospitals. And yet, measured as a share of the economy, our government health-care system is the largest of the bunch. And it’s worse than that: Atop our giant government health-care sector, we have an even more giant private health-care sector. Altogether, we’re spending about 16 percent of the GDP on health care. No other country even tops 12 percent. Which means we’ve got the worst of both worlds: huge government and high costs."
State supreme courts are disrupting state governments' budget cuts, reports Michael Cooper: "State budget battles -- usually between governors and legislatures -- are increasingly involving another branch of government, the judiciary. In recent weeks, court decisions have upended budget negotiations in California, Nevada and New Jersey, and more cases are pending in other states. Many of the recent decisions are the direct result of the economic downturn. The courts are finding that many struggling states are not meeting their responsibilities as they strive to save money. And because many states have been forced to close budget gaps year after year, these decisions are having an outsized impact, and intensifying fiscal pressures. In Nevada, for example, a court decision last month that the state had illegally used local revenue to balance its last budget opened a big deficit in its coming budget."
Liberal states are bucking one of the administration's immigration programs, reports Julia Preston: "Gov. Deval Patrick of Massachusetts has decided the state will not participate in a fingerprint-sharing program that is central to the Obama administration’s immigration enforcement strategy, dealing a new political blow to a program that has met rising resistance nationwide. Massachusetts is the third state to pull out of the program, called Secure Communities, after Gov. Pat Quinn canceled it in Illinois in May and Gov. Andrew M. Cuomo suspended New York’s participation last week. All three are Democrats from states with large immigrant populations, and they are close allies of President Obama, including on immigration issues. The governors’ actions seem to set up a confrontation with immigration authorities, who maintain that the program is mandatory."
Bonus adorable interlude: A kitten crawls out of a box.
This week's OPEC meeting won't change the price of oil, reports Steven Mufson: "It should be a recipe for a tense, important OPEC meeting: High oil prices, civil war in a key exporting nation, civil unrest across the region, a faltering economy in the giant U.S. market, and Saudi troops helping to suppress protests in Bahrain. Two different delegates -- one representing the regime of Moammar Gaddafi and one representing the Benghazi-based rebel coalition -- could show up and claim to represent Libya...But while the Organization of the Petroleum Exporting Countries meeting on Wednesday could produce political sparks, oil experts expect little change in the cartel’s output policies and thus little near-term change in the price of crude oil that has been such a drag on economic growth in Europe and the United States."
The Obama administration blocking a Canadian oil pipeline won't do much, reports Ian Austen: "One way or another -- by rail or ship or a network of pipelines -- Canada will export oil from its vast northern oil sands projects to the United States and other markets. So the regulatory battle over the proposed Keystone XL pipeline, which would link the oil sands to the Gulf Coast of the United States, may be little more than a symbolic clash of ideology, industry experts say. Even if the Obama administration rejects the Keystone plan, the pace of oil sands development in northern Alberta is unlikely to slow. Oil producers in Canada have several alternatives for reaching the United States market. And recent investments by Chinese companies in the oil sands suggest that a growing alternative market lies across the Pacific."
Closing credits: Wonkbook is compiled and produced with help from Dylan Matthews and Michelle Williams.